Mountain Creek files for Chapter 11 bankruptcy; plan would allow debt restructuring – New Jersey Herald

Posted: May. 16, 2017 12:01 am

VERNON -- Less than two years after acquiring Mountain Creek, the resort's new ownership has filed for Chapter 11 bankruptcy reorganization.

The filing, which had been rumored to be in the works for some time, was submitted in federal court Monday morning and seeks a restructuring of the resort's debt including an estimated $26 million in contractually obligated sewer debt payments to the Vernon Township Municipal Utilities Authority.

The debt obligations to the township stem from a 2012 agreement under which the resort's former principal owner, Gene Mulvihill, had agreed to have the resort assume approximately 65 percent of the MUA's debt to the Sussex County Municipal Utilities Authority for the buildout of the township's sewer system.

Mountain Creek CEO Jeff Koffman, reached by phone Monday, declined to elaborate but said he was still optimistic about the prospects for growing the tourism and resort industry in the Vernon Valley area.

In a press release late Monday, a Mountain Creek spokesperson indicated the filing would not affect existing operations at the resort and would best enable it to attract outside investment for other planned ventures. According to its website, the resort's waterpark is scheduled to open the weekend of June 10-11 and seven days a week starting June 22.

"The four-season resort, which offers gourmet restaurants, lodging and a variety of outdoor sports and activities, will continue to operate fully during the bankruptcy process," according to the press release.

Koffman, in a prepared statement included with the press release, said "(Monday's) filing will allow us to deal with the legacy debt we inherited from the property's former owners and attract new investment into the resort.

"We remain committed to seeing Mountain Creek develop to its full potential with new hotels, new outdoor attractions and expanded residential homes," he said. "Our vision to create a world class, four-season resort here in New Jersey is still our main objective and this move will put us in the best position to achieve that."

With Vernon's sewer system currently facing a cumulative debt of more than $40 million, it is unclear how the debt restructuring might impact the township or how much of the sewer system debt might otherwise fall on the balance of ratepayers, most of whom dwell in condominiums and single-family homes, if the court approves the restructuring.

Mayor Harry Shortway said late Monday that he was aware of the bankruptcy filing but had not yet had a chance to review it. He suggested, however, that the pickle in which the township now finds itself was the direct result of the township being misled by professionals under prior administrations who over-projected the amount of sewerage capacity the township would need, with the result that existing ratepayers have largely now been left holding the bag.

He also suggested that the resort's former owners -- who had previously talked of building an indoor waterpark and up to 1,500 new condominiums -- never intended to fulfill their contractual obligations to assume the lion's share of debt for the sewer system expansion.

Regarding the resort's current owners, "it's a major problem for them and I hope they can come out of this reorganization stronger," Shortway said.

Shortway nonetheless noted that 90 percent of the township's tax base was residential and suggested the collective well-being of smaller tourism-oriented businesses was as vital to the township's long-term economic future as that of Mountain Creek.

"We want all our businesses to do well, but I also believe in the smaller mom-and-pop shops and don't believe we can put all your eggs in one basket," Shortway said.

As for the township, "We have to find a way to get through this and we will," Shortway said. "We'll likely be looking to hire a bankruptcy counsel and will take the steps necessary to protect the township and to ensure this doesn't all fall on the existing base of ratepayers."

Council President Jean Murphy said late Monday that she was aware of the filing but said she and the other council members had not yet been briefed on its details.

"Our attorney is reviewing it, and we'll be considering all the options the town may have," she said.

Councilman Pat Rizzuto, who attended Monday's debate between the two Republican candidates for state Senate in the 24th District, said he, too, was aware of the filing.

Among the 17 other creditors named in the bankruptcy filing is Crystal Creek Associates, a special-purpose financing entity affiliated with and domiciled at Crystal Springs Resort, to which Mountain Creek owes approximately $885,000.

Mountain Creek is being represented in the bankruptcy proceedings by the Roseland-based law firm of Lowenstein Sandler.

The same firm also was retained by Sussex County last year as part of a review of cost overruns and delays associated with the county-wide solar project that was approved in 2011. The investigation by former State Comptroller Matt Boxer, a partner at the law firm, is ongoing.

Eric Obernauer can also be contacted on Twitter: @EricObernNJH or by phone at 973-383-1213.

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Mountain Creek files for Chapter 11 bankruptcy; plan would allow debt restructuring - New Jersey Herald